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MGM Resorts International (MGM) Q4 2020 Earnings Call Transcript

MGM Resorts International (NYSE: MGM) Q4 2020 earnings call dated Feb. 10, 2021

Corporate Participants:

Jim Freeman — Senior Vice President, Capital Markets and Strategy

William J. Hornbuckle — Chief Executive Officer and President

Adam Greenblatt — Chief Executive Officer, BetMGM

Corey Sanders — Chief Operating Officer

Jonathan Halkyard — Chief Financial Officer

Hubert Wang — President and Chief Operating Officer, MGM China

Analysts:

Joe Greff — JPMorgan — Analyst

Chad Beynon — Macquarie — Analyst

Shaun Kelley — Bank of America — Analyst

Thomas Allen — Morgan Stanley — Analyst

Carlo Santarelli — Deutsche Bank — Analyst

John DeCree — Union Gaming — Analyst

David Katz — Jefferies — Analyst

Robin Farley — UBS — Analyst

Stephen Grambling — Goldman Sachs — Analyst

Presentation:

Operator

Good afternoon, and welcome to the MGM Resorts International Fourth Quarter and Full Year 2020 Earnings Conference Call. Joining the call from the company today are Bill Hornbuckle, Chief Executive Officer and President; Corey Sanders, Chief Operating Officer; Jonathan Halkyard, Chief Financial Officer; Adam Greenblatt, Chief Executive Officer, BetMGM; Hubert Wang, President and COO of MGM China; and Jim Freeman, SVP of Capital Markets and Strategy. [Operator instructions] Please note this conference is being recorded.

Now, I would like to turn the call over to Jim Freeman. Please go ahead.

Jim Freeman — Senior Vice President, Capital Markets and Strategy

This call is being broadcast live on the Internet at investors.mgmresorts.com and we’ve also furnished our press release on Form 8-K to the SEC. On this call, we will make forward-looking statements under the safe harbor provisions of the federal securities laws. Actual results may differ materially from those contemplated in these statements. Additional information concerning factors that could cause actual results to differ from these forward-looking statements is contained in today’s press release and in our periodic filings with the SEC. Except as required by law, we undertake no obligation to update these statements as a result of new information or otherwise.

During the call, we will also use non-GAAP financial measures in talking about our performance. You can find the reconciliation to GAAP financial statements in our press release and investor presentation, which are available on our website. Finally, this presentation is being recorded.

And I’ll now turn it over to Bill Hornbuckle.

William J. Hornbuckle — Chief Executive Officer and President

Thank you, Jim, and thank you all for joining us today. I hope you and your families continue to be safe and well. Before we get to the details of our performance in the fourth quarter, I want to take a moment and thank the thousands of MGM Resorts colleagues around the world who have worked so hard over the past several months.

I along with the other members of the senior management team and be eternally grateful for the resilience and commitment that our employees have shown throughout this crisis. I continue to be amazed by what we’ve accomplished together. We have adapted seamlessly to rapidly changing environment always putting the safety and enjoyment of our guests and our employees first and foremost. More than anything else that gives me confidence in our company’s future success.

I’d also like to welcome the newest member of our executive team, our CFO, Jonathan Halkyard. Many of you know Jonathan from his tenure as CFO of Caesars and most recently as a Chief Executive Officer of Extended Stay America. Over the past 20 years, Jonathan has built a well-earned reputation for integrity, developing people, driving strategy and delivering results for shareholders. I’m excited to have him here at MGM. And even though it’s only been a short time, I can assure you he’s already having an impact. Welcome, Jonathan.

At MGM, our long-term vision is clear and differentiated. Our goal is simple, to be the premier omnichannel gaming hospitality and entertainment company in the world. We’ll achieve this vision by investing in the development of our people, providing fun and inspiring entertainment experiences for our guests, delivering operational excellence at every level and allocating our capital, drive the highest returns for our shareholders. During the quarter, we made progress on each of these fronts.

As the pandemic unfolded over the past year, we had to take the unfortunate steps of furloughing many of our employees to match business levels. As the business begins to recover and operating restrictions abate, we expect to continue remobilizing our fantastic teams, rehiring and retraining them in order to serve our guests. Over the course of this year, we will do the same with our industry-leading entertainers across all of our properties.

Our BetMGM sports betting and iGaming venture is growing at a historic rate enabled by what I believe is digital gaming as the most talented management and technology development teams. I believe our people are truly the best in this new industry. Operational excellence is a mantra here. Beginning in late 2019, we refined our operating model, increasing spans of control and simplifying organizational layers to accelerate decision-making, bringing us all closer to our guests and to reducing costs. These moves are already paying off. Our program of $450 million in domestic cost savings helped drive margin improvement, especially at our regional properties in the fourth quarter. And we should achieve the full target when business demands return to our 2019 levels.

And finally, we’re focused on being disciplined allocators of capital, always driven by the goal of creating value for our shareholders. In the first and second quarter of 2020 and the early days of the pandemic, it was critical to create and sustain the liquidity cushion for the company. With the top-line still under pressure and the travel climate a bit uncertain, our fortified balance sheet is essential to protect equity value while enabling MGM to be aggressive when identifying opportunities to invest for growth.

And invest for growth, we have — even as we’ve been managing through the crisis before us, we have kept an unwavering focus on the future and particularly on several attractive ROI growth opportunities that align to our long-term vision. Along with our partners Entain, we have invested in BetMGM and we have seen it emerge as a leader in the US sports betting and iGaming business. We’ve launched an extensive Rumi model program here at Bellagio slated to be done this summer. And we’re taking steps to expand the company’s digital capacities and strengthen our omnichannel strategy globally. And we have been laying the groundwork for growing our presence in Asia through the Japan IR opportunity and additional investments in Macau.

With that, let’s focus on obviously the fourth quarter’s results. Our consolidated fourth quarter 2020 revenues were $1.5 billion, incrementally better than our third quarter by $1.1 billion. Our fourth quarter adjusted EBITDAR has improved sequentially to a positive $97 million this quarter. Our full-year 2020 revenues were $5.2 billion, about 40% of 2019 levels and our full-year 2020 adjusted EBITDAR loss was approximately $148 million.

The operating dynamics in Las Vegas and our regional properties were, however, quite different in the fourth quarter. Let’s start with Las Vegas. Our fourth quarter Las Vegas Strip revenues were $480 million, about flat from the third quarter. However, our Strip’s [Phonetic] property EBITDAR was $54 million, up from $15 million in the third quarter, driven almost entirely by October and the first half of November.

The fourth quarter started relatively strong here in Las Vegas with hotel occupancies of about 46% during October. And in fact, October was our strongest month since the beginning of the pandemic. But public health concerns dampened visitation over the course of the quarter, and this has obviously continued at least till now through February.

Our fourth quarter hotel occupancy finished at 38% with weekends running at 52% and midweek at 31%. Our M life loyalty members continue to drive visitation with our Casino segment contributing to total room nights improving by about 13 points over the last year. And our casino customers and new M life member signups also continued to skew towards higher worth and younger customers during this quarter.

It’s our belief these headwinds will continue into the near-term. With current Nevada gathering guidelines in effect and public health sentiment where it is, we expect midweek business will be challenged throughout the first quarter. In this demand environment, we have remained flexible to minimize our cash usage and ultimately maximize our portfolio-wide profitability.

In the fourth quarter, we closed our hotel towers at Mandalay Bay and Park MGM during the midweek and in early January, we also announced the full closure of Mirage during the midweek. We remain diligent and closely aligning labor needs to demand. The good news is, the approved vaccines appear highly effective for vulnerable populations and we’re monitoring the roll out closely. As the burden of our health care system is gathering, travel restrictions are being lifted. Assuming that most of the population is willing to resume normal activity, which we certainly saw glimpses of last summer, then we believe the demand for travel and visitation Las Vegas could be robust later in the year.

In fact, our gross bookings in January was the strongest since the start of the pandemic and guests are increasingly booking 90-plus days out. I’m also looking forward to the coming pool season with much optimism. While the return of the larger groups will ultimately depend on the easing of gathering guidelines and other factors, we remain bullish on the long-term demand. We still have significant rooms on the books for the third quarter and have more on the fourth quarter than we had at this time last year.

Both 2022 and 2023 are approximately one on pace compared with prior years and it’s interesting the obvious CBA recently conducted a survey which indicated that 91% of those surveys missed the face-to-face nature of meetings and the majority were also just simply burnt out from virtual meetings. The survey also indicated that business travelers believe Las Vegas is more prepared than other leading business destinations to safely host in-person events.

Data points like these tell me that the fundamental drivers of Las Vegas as a tourism and meeting destination remain firmly intact. We remain bullish in its proven ability to drive demand and believe the market’s return to pre-pandemic levels over time.

Now let’s move on to our regional performance. Our regional operations performed exceptionally well in the fourth quarter despite being subject to a series of operating restrictions. Our fourth quarter regional operations revenues were $595 million, up 7% sequentially versus the third quarter. And adjusted property EBITDA was up 9% sequentially from the third quarter to $159 million.

As in Las Vegas, we were highly encouraged that our performance was led by a higher level of casino spend by a younger demographic. Gaming volumes were approximately 70% of last year’s fourth quarter, but our regional properties delivered 129 basis points year-over-year EBITDA margin growth to 27%. We achieved this despite the statewide restrictions, including the full closure of Detroit for a month, as well as the weeklong exposure and extended hurricane repairs at the Beau Rivage.

Adjusting for these headwinds and other state-by-state restrictions, we expect our margins for the quarter would have been up 580 basis points year-over-year. These continued cost improvements predominately in labor and marketing efficiency are largely sustainable. I expect continued strong regional margins as revenues returned towards our 2019 levels. Finally, I know we are all encouraged by the states lifting operating mandates over the past couple of weeks. No doubt, this will enable our properties to serve greater numbers of guests and expect these guests will lead the recovery in our system.

Now, I would like to spend a few minutes on BetMGM. The sports betting and iGaming market is one of the largest and most exciting growth opportunities in the USA today and BetMGM is emerging as a long-term leader. BetMGM began 2020 in just three markets and has ended the year with 10. It is now currently live in 12 states and we expect to be in 20 states by the end of 2021 with access to approximately 40% of the US adult population. As each state rules out, BetMGM is securing a leading market share position. In the fourth quarter, BetMGM’s market share was 17% and its retail and online markets at 19%, if you exclude Pennsylvania which were only open for a part of December. This is a testament BetMGM’s successful execution and strong management teams as it continues to enter new states on day one and gain share in its existing markets.

Consider the venture’s entry into Michigan just a couple of weeks ago. We had a fully operational iGaming and online sports betting offering on day one and pre-launch registration efforts to build momentum into go-live day. Between December and January, BetMGM registered 138,000 customers in the first 10 days of launch BetMGM generated $13 million in GGR. That’s especially impressive is that our iGaming GGR per day in January was higher than in New Jersey, where BetMGM is the number one operator.

Michigan is a market where we knew we had the right formula to win. We have an MGM branded retail presence with a loyal customer base, the ability to go live on day one with both iGaming and sports betting, a compelling product, an attractive target and an attractive target demographic. While it’s still very early, we’re extremely pleased with these results thus far.

Our leadership positions have proven sustainable. BetMGM was the number one iGaming operator in the US in the fourth quarter and we expect to continue growing our market share.

On the sports wagering side, BetMGM delivered impressive online sports betting results in two of its newest markets, Colorado and Tennessee. In the fourth quarter, BetMGM had market shares of 31% and 34%, respectively. These share gains led to $178 million of net gaming revenues associated with BetMGM in 2020, well above its target of $150 million. And in fact, in the fourth quarter, BetMGM’s net revenues doubled the previous quarter.

The convergence between BetMGM and M life has been monumental. In the fourth quarter, 17% of BetMGM’s signups have come from MGM and 39% of the new M life signups have come from BetMGM. BetMGM’s key competitive advantage is its ability to lever MGM’s destinations, our broad-based experiential offerings and our M life loyalty program as efficient and effective customer acquisition tools. Once engaged, we know that omni-channel customers have vastly greater value to our company than single-channel customers. And again, while we’re still in the early days in Michigan, we are already proving this out. We are currently seeing customer acquisition costs below the $200 range.

In 2021, we and our partners Entain expect new revenue associated with BetMGM to grow well over 100%. In fact, preliminary estimates of January’s net gaming revenues associated with BetMGM operations was $44 million. On Super Bowl Sunday, the number of online bets placed with BetMGM was 11 times last year’s online bets and the online handle was 17 times last year’s handle. That is why we remain aligned on investing aggressively to fund the growth of this business and we expect to continue doing so this year in pursuit of this market opportunity.

Let me conclude now with our performance in Macau. This market continued to steadily improve sequentially with fourth quarter market-wide GGR declining 70% year-over-year compared with 93% year-over-year decline in the third quarter.

MGM China’s fourth quarter revenues were $305 million, up sequentially from the third quarter’s $47 million and adjusted property EBITDAR was also up sequentially from a $96 million loss in the third quarter to $41 million in the fourth quarter. This included a $23 million bonus accrual reversal during the quarter.

We are pleased to finally see that MGM China is back in the block, driven by strong market share gains as well as continued cost mitigation efforts. Better yet, we think the evolving market structure of Macau’s gaming squarely meets our strengths in the market. MGM China has always been geared to the premium mass segment between our branch office infrastructure, our product design and our marketing capabilities, we’ve always had an advantage in this segment. And our growing market share is evidence of this evolution.

There is no question that we recently reemerged — with the recently reemerged COVID cases and government warning and limited travel during the Chinese New Year holiday seasons have impacted demand in the near-term. But we expect the broader rate of recovery will continue to be gradual and driven by the premier market, mass market. I like our opportunities for accretive investment in Macau. Currently, construction of additional suites in the south tower of MGM Cotai is underway and will be ready in mid-2021.

We’ve also begun remodeling our MGM Macau villas and the gaming space on level 35 and that both properties were adding F&B options focused on the gaming floors. And in longer terms, we’ve also had the ability to build out another hotel tower at MGM Cotai, along with meaningful entertainment assets to diversify our offerings. For the past 13 years, MGM China has been committed to supporting Macau as a world tourism destination. We again look forward to working with the government through the licensing renewal process in hopes to further our support for many more years to come.

Switching on to our liquidity. It remains extremely strong and has served as a strong foundation from which to navigate the crisis with an eye towards our longer-term goals. As of December 31st, MGM had $8.8 billion of consolidated liquidity, which included $2 billion at the MGP operating partnerships and $1.2 billion at the MGM China, leaving our domestic operations liquidity at over $5.6 billion.

Before I turn this over to Q&A, I’d like to close just with a few final thoughts. We remain diligent in navigating the near-term operating environment, aggressively managing our operating model and our cost structure. I am optimistic about the long-term recovery of all of our markets and believe that MGM is well-positioned to gain share. I’m also excited by BetMGM’s position in the rapidly growing US sports and iGaming betting market. And we are confident that despite near-term headwinds, our balance sheet delivers a strong foundation upon which to build the future of our company.

With that, I’ll be happy to open this up to any of your questions. Thank you.

Questions and Answers:

Operator

Thank you. [Operator Instructions] And our first question will be from Joe Greff with JPMorgan. Please go ahead.

Joe Greff — JPMorgan — Analyst

Good afternoon, everybody.

William J. Hornbuckle — Chief Executive Officer and President

Hi, Joe.

Joe Greff — JPMorgan — Analyst

Thank you for taking my question. Bill, based on conversations with Nevada health officials or Governor Sisolak’s office, when would you anticipate a rollback in the more recent capacity restrictions in Nevada? And does March seem likely seasonality ideally would make sense? And how do you then think about some of the midweek room closures and reopening some of that hotel capacity?

William J. Hornbuckle — Chief Executive Officer and President

Look, obviously we’re in constant dialogue with the Governor’s office and the health officials. We’re hopeful that there’ll be a March rollback, probably till October levels would be ideal. There are no promises, but the Governor has slated a call for later this week. I would suspect we’ll see something targeted towards March. So I think March may hopefully begin to feel like October, if we’re lucky. And by the way, this is my presumption, not my knowledge. And I’m hoping by end of spring as we go into June, we’ll see yet another significant rollback as we get ready for events.

There are several large conference conventions that want to come both citywide and here at the property. And then, as you know, March Madness and followed by early spring break pull season around here is substantive and meaningful. And so, I think we’ll see occupancies hopefully go back to October and then beyond. I know Corey is planning — maybe speak to Corey quickly some openings here and sometime in March.

Corey Sanders — Chief Operating Officer

Yeah, Joe. Our focus on openings will be if we could burn less cash being opened. And what we’re seeing on our booking pace, that will definitely occur at the beginning of March. So we would expect to open those three properties seven days a week beginning in March.

Joe Greff — JPMorgan — Analyst

Got it. And when you look at sort of the net group convention booking activity, what’s sort of the period or month where you see quality slippage from canceling and rebooking at a future date fees? Is that September? Is that October? And then, when you look at ’22 bookings, I know you were generally pretty positive on that. If you look at the number of conventions versus the number of anticipated attendees associated with the conventions, is there much of a difference there? So, at some point, we have to be concerned with attendees not just sort of whether or not the event will take place when we think about next year.

Corey Sanders — Chief Operating Officer

Yeah, Joe. This is Corey. I do think especially the ones that will attend this year, we have some association group, some pretty big sized ones scheduled even beginning in June. We do expect the attendees to be a little bit less initially. But I think as vaccines roll out and as people feel more comfortable traveling, the amount of people coming may not approach what it was at peak, but we hope to see that return in the beginning of 2022.

The big — the first big citywide event has actually been scheduled and has been talked about. That’s the World of Concrete at the new convention center addition, which I walked yesterday and it’s quite spectacular, will be really great for the city. I think it will give the city a competitive advantage. And then literally two weeks later, they have Barrett-Jackson. So we are optimistic. What we see on our books in the third and fourth quarter, we still have quite amount of rooms on there.

And we’re — fourth quarter, we actually have more rooms on the books than we did same time last year as we look at year out. And so, we’re pretty optimistic on what we see in the future. The other data point that we’re starting to see is people are starting to look to book, and we have over 120,000 rooms under contract for 2021 out there right now that I think people are just getting — looking for one more sign to say that things are going to be on the clearer side.

William J. Hornbuckle — Chief Executive Officer and President

And then, Joe, maybe a little color to put things in perspective, I always find this number interesting. We collect a lot of advanced deposits for entertainment. Mind you, we haven’t had entertainment now for a better part of the year. We’re still holding 82% of those advanced deposits, for things like Lady Gaga and other shows that some have not even rebooked yet. And I think what it simply says is that when available people want to come back. And the idea of their being — yes, some of the groups may be light in participation, but I think the overall leisure travel and the notion of us with this massive amount of pent-up demand for people to get out, I think will offset it in occupancy. For us, some of it’s going to be about RevPAR over the short-term, not the long-term. But I’m pretty excited by the trends and the way people have reacted to-date. We just had a great Super Bowl weekend in terms of participation. So, I think people will respond as we come out of this.

Joe Greff — JPMorgan — Analyst

Great. Thanks so much for the thoughts, guys.

Operator

The next question will be from Chad Beynon with Macquarie. Please go ahead.

Chad Beynon — Macquarie — Analyst

Hi. Good afternoon, and thanks for taking my question. I wanted to touch on the press releases that were out during the quarter just on the Entain situation. You were very clear in terms of everything you’ve been able to accomplish recently with BetMGM. But just wondering if you could elaborate a little bit more in terms of what was announced, the process and then if you would expand beyond the United States given your success here if that was part of the thinking with your original proposal. Thanks.

William J. Hornbuckle — Chief Executive Officer and President

Chad, look, I mean, the thinking is, we see a great deal of opportunity in digital gaming sports or iGaming and other potential channels, actually where entertainment and gaming could converge. That being said, it’s a big world. Obviously we have a very good partner in Entain. We have our JV with BetMGM that I’ve just articulated how well we think it’s doing. There’s a lot I can’t say. There are UK takeover rules, so there’s a whole lot I can’t say about our thoughts around that. Obviously we had an interest. We’re now in a quiet period. We’ll have to see what happens. But I will say this, it is MGM’s intent to play in the space on a substantive and significant level on a global basis. And so, whether this is the avenue or the route to do it or not, I think time will tell. But we do want to diversify our revenues. We think this is where the industry — it’s already started to prove itself. This is where the industry is going. And we want to be a larger part of it.

Chad Beynon — Macquarie — Analyst

Thanks, Bill. Appreciate it. And then, one thing you hadn’t touched on yet is Japan. There were some announcements out there on another market, not the market that you’re focusing on. Could you just give us an update in terms of what’s the latest in terms of timing provincially and then with the federal government over there? Thanks.

William J. Hornbuckle — Chief Executive Officer and President

Sure. The federal government announced a nine-month delay. Osaka has not given us the requirements of what that will mean to them and our submissions. I think that will be coming out within the next several weeks. I think you’ll see a requirement of us to submit an RFP with our partner Orix sometime this summer. It’s yet to be ultimately determined and we’re ready to go.

I mean, we’ve been in that marketplace a long time. We’re a believer in Asia. We’re a believer in Japan. We’ve spent a lot of time and energy becoming the sole — one standing at the gate, if you will, in Osaka. And so, how long this all takes, obviously COVID has hit there as equally as hard and there’s a great deal of sensitivities around it in that market. We haven’t had our people on the ground there for a better part of nine months. So, it’s going to take some time to rebound. But we have the intent as well I believe that the government still has the same intent moving forward.

Chad Beynon — Macquarie — Analyst

Thank you very much.

Operator

The next question will be from Shaun Kelley with Bank of America. Please go ahead.

Shaun Kelley — Bank of America — Analyst

Hi. Good afternoon. Thank you for taking my question. And Jonathan, welcome. I just wanted to start, Bill, you gave some really interesting disclosures on what you’re up to in sports betting and iGaming front and specifically some great data around Michigan. And I just wanted to get maybe a sense, in particular, the iGaming numbers look really stellar to launch off. I mean, already being at a pace that’s ahead of New Jersey is pretty significant given, I think, the population is about the same size. So, could you maybe unpack that for us a little bit? What do you think is driving the depths of that market? What do you think is driving MGM’s success there as it relates to maybe some of your cross-sell opportunities and customer acquisition?

William J. Hornbuckle — Chief Executive Officer and President

I’ll kick it off. I’d love you to hear from Adam here because he’s obviously doing this everyday up there. But we got going early. We were ready for it. We pre-registered folks. We had a campaign. Obviously we’ve got a huge brand presence there. We have a deep and rich database there. And ultimately, I think, with our product, it resonated. But, Adam, why don’t you provide some color?

Adam Greenblatt — Chief Executive Officer, BetMGM

Yeah. Absolutely, Bill. Thanks, Shaun, for the question. Well, firstly, I’m delighted to be here. And it’s a testament to the work of the BetMGM team, the success we are seeing. And Michigan is a great example of our strategy, BetMGM strategy coming alive. Bill has already touched on the power of the brand. We’ve got BetMGM Detroit — branded BetMGM — MGM Grand Detroit brand as the power of omni-channel. We’ve got both sports and gaming, and that really plays into our hand.

The technology that we use from Entain was built in a way that gives us tremendous amount of flexibility in driving cost product play. And we’re really seeing this come to life in Michigan. And I think the key step that perhaps one you’re looking for is multi-product play. Recognizing that we’re in the early days of the market, we are seeing well over 30% of our customers playing both casino and sports. And so, we’re really excited about it. There’s so much potential. iGaming has started more strongly than our sports business. The Super Bowl was very good for our sports business. So, yeah, the future of that state is very, very encouraging.

Shaun Kelley — Bank of America — Analyst

Thank you, Adam. And then, maybe as my follow-up, you guys did allude to your customer acquisition cost being, I think, lower than some of the market standards that we’ve seen in other markets. And kind of curious on your thought of is that type of rate sustainable when you have this type of presence and kind of first day launch or do you expect to begin to reinvest some of that lower customer acquisition cost both as the market matures and also maybe divisively [Phonetic] further boost your market share presence.

William J. Hornbuckle — Chief Executive Officer and President

Adam, again, why don’t you…

Adam Greenblatt — Chief Executive Officer, BetMGM

Yeah. First off, Bill already touched on our ability to get live on day one of the market. And your question is relevant to that. What we are seeing having launched five states in 87 days, a very, very busy first quarter and beginning of 2021, what we’ve seen is that in the first few days, the early weeks of the market, CPAs were very low. Then we see, as competition, other operators join us in those markets, we see CPA rates rise. We expect then the guidance that you’ve had from us and others to sustain for a period. What we do expect though is that as the market rationalizes, as the market matures, the leaders cement their position in those leadership positions that we will see those CPAs come down in due course. So that’s kind of the profile.

Shaun Kelley — Bank of America — Analyst

Great. Thank you very much.

Operator

The next question will be from Thomas Allen with Morgan Stanley. Please go ahead.

Thomas Allen — Morgan Stanley — Analyst

Thanks. Just a more BetMGM questions. I think the key message is that you’ve gotten really strong share to date and you see room to continue to ramp. And looking at your disclosures quarter-over-quarter, it seemed like you ramp New Jersey iGaming share from 20% to 25%; and Colorado online betting share [Phonetic] from 12% to 31% despite, I believe, you launched on May 1 in Colorado along with the rest of the market. So what’s driving this really strong ramp and what gives you confidence to continue to go? Thank you.

William J. Hornbuckle — Chief Executive Officer and President

Go ahead, Adam. And you can’t say brilliant management but go ahead.

Adam Greenblatt — Chief Executive Officer, BetMGM

Well, that’s where — obviously that’s where I was going to go. Our business is a detailed business. Our business is the orchestration of all of the tools from the top of the acquisition funnel, to how we look after players, to how they experience our product, to our real-time CRM tools, to the brand, to the work that we are doing with MGM Resorts, to really bring to life that MLS database, to the fact that our players, that BetMGM players earn loyalty points that are redeemable for real life experiences within properties. All of these factors play a part into differentiating what BetMGM represents to our customers.

And so, to pull out one or other elements of that, I think, doesn’t really reflect how important it is to line up all of those factors in order for the whole thing to come together, and that I believe is what is driving the momentum that we’re seeing in our business. And it is sustainable because of it. It’s difficult to do and the business — our BetMGM business is now really hitting straight. We’ve got the right team. The tools are working and we’re seeing the fruits of that in the numbers.

Thomas Allen — Morgan Stanley — Analyst

Adam, I guess, as a follow-up, you hit number one share in Tennessee. There are fewer competitors in that market but you still have the main competitors in that market. What do you think is driving your leading position there? And then you also highlighted in the slide deck $13 million of deposits in January. Can you just talk a little bit about why that’s relevant? Thank you.

Adam Greenblatt — Chief Executive Officer, BetMGM

Yeah. I’m personally delighted about Tennessee because many — some have suggested that we would accelerate gaming but perhaps not be as strong in sports. And for me, Tennessee is the poster child of our ability to compete against the early leaders in a sports market only.

Now, why are we seeing such success? We were there on day one. All of the components of our operating model were in place right from the start. We have the right partners. We are partners with the Titans. So put all those things together, obviously, combined with product, CRM, all of the acquisition machine working, and we’re demonstrating that we can fight and win toe to toe with the best. In relation to your second question which is around deposits, that’s important because that’s the fuel. No deposits, no ability to wager, no ability to play.

And that the other point is, what is important. Rephrase — the moment of truth is our players actually putting hard earned money into an account to play with us rather than it being purely bonus money, incentive money. And so, the importance of that $13 million is it demonstrates the scale of fuel to drive NGL. I hope that’s helpful.

Thomas Allen — Morgan Stanley — Analyst

No. It’s very helpful. Thank you.

Operator

And the next question will be from Carlo Santarelli with Deutsche Bank. Please go ahead.

Carlo Santarelli — Deutsche Bank — Analyst

Hey, guys. Good afternoon. Bill, if you could just — as you guys think about the book of business on the group side for ’22 and ’23 and you kind of look at where occupancy levels were and where rates were in 2019, obviously the group side is pretty encouraging. So, when you think about the ability to backfill and drive pricing and stuff, assuming the base case scenario, vaccinations, everything plays out, we flip the calendar next year and all of this is behind us. How do you guys kind of think about a return from a hotel revenue, RevPAR, profitability perspective over the ’22-’23 period [Indecipherable]?

William J. Hornbuckle — Chief Executive Officer and President

Yeah. I would hope, by the fourth quarter of ’22, we’re at about a 90% pace of where we were in 2019. I think the question really becomes what do the first and second quarters look like, and that’s obviously dependent on the balance of this year and how quickly that ramps. But I hope to be every bit of the way there and maybe even the third quarter. It just again depends how quickly it comes back. It depends on how much rebound, enthusiasm we have from customers just wanting down the house. Well, I think again the group business may be slower. We certainly have the business on the books. I think there’s going to be massive pent-up demand in terms of leisure business wanting to come.

And then we really haven’t thought about or talked about the funnel for international. I mean, I think you all know this historically that Bellagio summer. So we can get into summer of next year with a clean slate internationally is 40% of our guests are truly, not only gaming, I mean, our guests are international. And so, we have a large segment of that business, I think that’ll play into this. If it’s allowed to come back the way we hope and believe it will. And so that’s my thinking or sentiment. Corey, I don’t know if you agree.

Corey Sanders — Chief Operating Officer

I completely agree, Bill. The only other dependent is really air traffic and how much — how fast they can build their capacity back because I think the demand for our business will be there.

Jonathan Halkyard — Chief Financial Officer

Hey, Carlo. It’s…

Carlo Santarelli — Deutsche Bank — Analyst

Yeah. Go ahead.

Jonathan Halkyard — Chief Financial Officer

Yeah. Carlo, it’s Jonathan. And I — the only thing I would add is that I think this could be particularly interesting with these revenue gains against the cost structure that’s been resized as a result of a number of the initiatives this company has taken on over the past 18 months and is now being tested in certain pockets of growth that we’ve seen, whether it be weekends or on the regions and has really resulted in margin expansion in those periods. So, I think that the top line certainly is an important part of the question. But the way in which we follow that through down to EBITDAR is going to be probably even more exciting.

William J. Hornbuckle — Chief Executive Officer and President

We had in the fourth quarter, I think the point that — the occupancy in the fourth quarter, bless you, Corey, was 34% something like that?

Corey Sanders — Chief Operating Officer

They were a little higher.

William J. Hornbuckle — Chief Executive Officer and President

A little higher?

Corey Sanders — Chief Operating Officer

Yeah, yeah.

William J. Hornbuckle — Chief Executive Officer and President

But the margins were up into the 40s. So, I mean, we had — so it’s not — even that small amount of volume, we can see the margin, we can clearly see in the regional businesses. But as Las Vegas returns, we’ll see. I think here first and foremost in Aria hopefully and then it will flow through the balance of the business.

Carlo Santarelli — Deutsche Bank — Analyst

And Bill, just to clarify. I think you said 4Q ’22. Did you mean 4Q ’21 with that 90% number?

William J. Hornbuckle — Chief Executive Officer and President

So I meant 4Q ’22. You asked the question on ’22, vice versa. I’m sticking on that.

Carlo Santarelli — Deutsche Bank — Analyst

[Indecipherable]

William J. Hornbuckle — Chief Executive Officer and President

Okay.

Carlo Santarelli — Deutsche Bank — Analyst

I just want to make sure. Okay. Thank you. And then, just one follow-up. As you guys — obviously you guys talked a lot about the sports piece and after — it’s been off to the races and are really strong. So how should we think about and I know this is going to be kind of a moving target because unfortunately as new states come online, clearly you’re going to be spending and investing in those states and that’s going to take kind of a profitability window longer, which is ultimately obviously a good thing.

But if you think about the states where you’re live now with that you were saying, the volumes you’re achieving and think you will be able to subsequently achieve, what would you say kind of breakeven from an EBITDA perspective on the sports side if you could comment, if we were to just assume status quo and no new state launches?

William J. Hornbuckle — Chief Executive Officer and President

Look, Adam, I don’t know if we’ve broken out exactly that way. I think we’re in the second half of ’23 and beyond before we start to come down, if you will, off of peak investments. And obviously it depends on how states rollout and when. Obviously by ’24 and ’25 we have models that are throwing off substantive EBITDA.

Adam, I don’t know if you want to add to that.

Adam Greenblatt — Chief Executive Officer, BetMGM

Yeah. That’s absolutely right, Bill. It’s — on a state basis, we’ve indicated that our expectation is, it takes about three years to get to breakeven. So the critical piece here is the timing of state rollout, particularly the big states.

Carlo Santarelli — Deutsche Bank — Analyst

Great. Okay. Thank you, guys, very much.

William J. Hornbuckle — Chief Executive Officer and President

Thanks, Carlo.

Operator

And the next question will come from John DeCree with Union Gaming. Please go ahead.

John DeCree — Union Gaming — Analyst

Good afternoon, everyone. Thanks for taking my question. Just one for me to continue the discussion on BetMGM. One of the statistics you’ve provided was about 17% of BetMGM signups have come from M life. And I’m not sure if you have any real data, but I’m curious if you could talk about where sort of the other customers are coming from. You’ve got a number of partnerships that you put together, Yahoo! Sports teams and such. And I’m curious if you have a sense of where the other 80% or so of customers are coming from. And if that’s not really available, kind of where are you spending your efforts in customer acquisition away from M life in direct marketing, anything like that that you could kind of give us a little bit of color on how you’re acquiring those other customers right now.

William J. Hornbuckle — Chief Executive Officer and President

Adam, over to you.

Adam Greenblatt — Chief Executive Officer, BetMGM

Yeah, absolutely. By far, MGM is number one. Through M life and omni, MGM is number one. We’ve said that and that remains the case. And frankly, I think that’s only going to get bigger. Clearly, we’re at limited not to reduced occupants in the properties. And we’re seeing great conversion rates in the properties, both conversion rates and also CPA. So very excited about a post-COVID world.

After that, you correctly referenced Yahoo!, Yahoo! is our next largest partner source of traffic. They’ve just actually been licensed in Michigan and have already seen the positive impact on player recruitment from that. Behind that, there is a range of sources. We’re investing in brands. We’re investing in outdoor, TV, digital. So, the biggest single source rather than being attributed to one partner, our biggest source of traffic is organic. So, it’s the combination of all the work we’re doing on brand and TV and outdoor. So, people actually typing into their browser get MGM. That’s the next biggest one. But otherwise it’s a range of origins.

William J. Hornbuckle — Chief Executive Officer and President

And then, John, frankly for us in the brick-and-mortar side, it’s the inverse, because that number is almost double in terms of people that we’ve been able to reactivate to the brand, bring in. I think I mentioned in the last call some of the success we had Pogada [Phonetic] bringing back 165,000 folks — reigniting 165,000 folks from M life who hadn’t been in a while. And so, it’s a two-way street. Obviously for acquisition for Adam’s team, this is the cheapest. For us, it’s the opportunity to reactivate and re-engage. In fact, we stay engaged 365. Vegas, they come one-and-a-half times a year if we’re lucky, regionals or more. But the idea that we could have connectivity for that extended period of time is pretty exciting.

John DeCree — Union Gaming — Analyst

Thanks, Bill. I agree. I’ll let you get a couple more quarters of casinos reopening and then I’ll ask you for some stats on how those new BetMGM customers and the M life are doing at the casino, looking forward to that.

William J. Hornbuckle — Chief Executive Officer and President

Okay.

John DeCree — Union Gaming — Analyst

Thanks a lot, everyone. And congratulations on the solid results.

William J. Hornbuckle — Chief Executive Officer and President

Thanks, John.

Operator

The next question will be from David Katz with Jefferies. Please go ahead.

David Katz — Jefferies — Analyst

Afternoon, everyone. Two questions. And if we can — this may be a chance to get Jonathan in the game. As we look at the recovery, specifically in Vegas, we’ve all talked about how the regionals expect to retain a healthy amount of the margin increases. But I’m wondering how complex it is opening large scale integrated resorts and the degree to which you can sort of hang on to margins. I’m wondering what comment you can make about profitability levels as we roll out to a more normalized level, whatever that is ’22, ’23, and how that margin percentage compares to ’19.

Jonathan Halkyard — Chief Financial Officer

Yeah. Thanks for getting me in the game. I’ll offer a couple of thoughts. There’s — as I’ve done some forensics on the performance of the business last year and in ’19, looked at the projects which Corey has led through operations to really reconsider the operating model and not just in the past 12 months but even before the company entered 2020. I’m convinced that this business with the return of the volumes as complex as it is as you noted, can secure the gains in the cost structure that they have seen so far.

It was a long time ago — it feels like a long time ago. But it’s important to note that this time last year in January and February of 2020, MGM’s property level margins had increased almost 500 basis points over the prior year. And that was a benefit of the cost moves and some restructurings that occurred during 2019 and we were already seeing in the numbers a year ago.

And that program — those series of programs were augmented further of course during 2020. And beyond that and this has been a bit of a surprise for me coming to MGM for sure. The company really has a very effective operating model with centers of excellence in the areas you would expect, hospitality, gaming, finance, entertainment that cut across the entire enterprise and are effective and efficient delivering, I think, a better outcome at lower cost. And that kind of organization is absolutely critical when we talk about things like the reopening of these properties. So, I certainly anticipate EBITDAR margins solidly above 30% across the enterprise as we recover. We would have seen that in the regions in the fourth quarter of 2020 had we not had the closures. And I’m confident that we can get there in Las Vegas as well as we reopen.

William J. Hornbuckle — Chief Executive Officer and President

And David, I just might add a thought. Look, we are open. We open and close some of them every week, and that’s a complex process. But — and so, we’ve proven to ourselves that the restructure, our ability to spread management across multiple properties in terms of senior leadership not only is going to work, has worked. And so it’s not overly complicated.

I think the trick for us will be make sure that we’re tight and we’re disciplined on yielding volumes and making sure that we do labor the way we forecasted it and the way we’ve presumed that we’ve done historically in the last couple months as Jonathan mentioned before the pandemic. That’ll be our test, if you will. It’s not overly complicated at this point. Kind of being here in the middle of the ship is probably the most complicated.

David Katz — Jefferies — Analyst

Understood. And thank you for that. My follow-up is probably not for Jonathan. I wanted to ask about the digital gaming and the degree to which and the importance of which owning your own technologies and owning your own capabilities becomes increasingly important as you scale. Candidly, it was one of the first thoughts I had around the — just before the Super Bowl when there started to be some news about volumes becoming an issue. If you could just talk about that importance going forward that would be helpful economically and strategically.

William J. Hornbuckle — Chief Executive Officer and President

Yeah. Look, I will kick it off and then I think Adam can speak to the Super Bowl. I’ll be happy to hand him that one. The good thing with our partnership is, it’s that. We gave our retail business. They gave their technology. And so by not owning our technology in most circumstances, there’s a percentage that comes with that. We’re not burdened with that, if you will. We’re not paying a percentage of GGR or NGR — GGR on someone else’s technology. So that’s the first affirmative thing.

When it comes to this initiative with Entain, obviously America is the biggest thing in the world right now. And so we’re all highly focused on it. And so, our ability — and as you know, it was rough out of the gate. But our ability over the last year, particularly led by Adam now to get the teams engaged, to get the technology, to get the development effort, to get the product that we need and want for America of note, because obviously we’re designed to speak to Premier League and other things has been meaningful. Sure. Ultimately, at some point, it could come into play. But for today, we don’t pay the premium that others do.

As it relates to Super Bowl, it wasn’t necessarily a volume thing. But, Adam, why don’t you just comment on it for a moment?

Adam Greenblatt — Chief Executive Officer, BetMGM

Yeah, of course. But if you’ll indulge me just before I get onto that, just to — David, to build on what Bill has said. Owning your own technology piece is important for — on four pillars. The first obviously is cost. We’re not paying away to a third-party the cost of it. But importantly, by owning our product, we can get to market quickly. We can be there on day one as we’ve demonstrated 5 times over in 87 days. I don’t think anybody else has done that. So, speed to market so that we can capitalize on that pent-up demand, that low CTA period. That is vital and valuable.

We can also — staying with product, we can also respond quickly, and I believe more quickly than anybody else to what customers are telling us. And we have a research group now and a research process so that the process of ongoing improvements to product can be translated into what customers experience as quickly as possible. So that’s a further benefit.

Content is the other. We have in-house with — in our partnership with Entain, we have in-house studios which allow us to bring unique content to market which is both cheaper than buying. Obviously we’re not paying away a rev share. But it’s the only place in town that you can play certain games. Our most popular iGaming product in New Jersey and now in Michigan is our in-house developed game. So — and playing that forward, why is that relevant? Because we think that we can continue to develop, innovate and differentiate.

And the last is the tools that are unique to our platform. The player management tools, the customer communication tools, all of those come together in a way that we think is strategically valuable. Now, getting on to the — that’s all the good stuff.

As regards the Super Bowl, Bill already mentioned, the Super Bowl was a record-breaking day for BetMGM. Online bets 11 times last year, online handle 17 times last year. And our digital performance was robust throughout the US, which, as you’ve probably read, wasn’t the case for all operators and actually enhanced our competitive position.

But Nevada was different. And in Nevada only, we did have an outage, which resulted in the system being down during the game. But the system was restored shortly after and has been working as normal ever since. Now just in the important parts, the issue that caused the outage was specific and was the unfortunate result of a human error and has been addressed.

We know that the software works, which makes the downtime on Sunday all the more disappointing, particularly given all the tremendous work that was done by our MGM colleagues in preparation for the event, which was just enormous. And it goes without saying that we sincerely apologize for the inconvenience caused to our customers, who I hope are looking forward to March Madness as much as we are. And I’ll give it back to you, Bill.

David Katz — Jefferies — Analyst

Thank you very much.

Operator

And our next question will come from Robin Farley with UBS. Please go ahead.

Robin Farley — UBS — Analyst

Great. Thank you. All of my BetMGM questions have been answered already. Just one on Macau. Obviously you were cash flow positive in the fourth quarter. But I know from your comments and comments that others have made, it sounds like a lot of that was really in the month of October. So, just wondering with the sort of dampened levels that you’ve talked about, is the property cash flow positive now here in Q1 so far?

William J. Hornbuckle — Chief Executive Officer and President

Hubert, you’ve stayed up all night for this. This is all yours.

Hubert Wang — President and Chief Operating Officer, MGM China

Thank you. Thank you, Robin, to make my early rise in Macau worthwhile. Actually I think I want to correct one thing you had stated. In Macau actually, the cash flow has been — was positive each month in the fourth quarter. Actually December had the best financial results. And also, in terms of business recovery, December was the strongest. And of course, going to first quarter, we saw some of the momentum carried over in the first week of January. But after that, because of the COVID cases in China increased, so there was some travel advisory put in place by the Chinese authorities at all different levels.

We do anticipate that the hotel occupancy will reach a level similar to October closing weeks last year for the Chinese New Year period. And this will be a period for us to remain positive for quarter-to-date period. And the visitation to Macau is a function of COVID cases in Macau, COVID cases in China, and also the availability of vaccination.

I think when you look at these variables, there is no reason to believe that the travel advisory will stay in place for long period of time because I think Macau has been almost 250 days without any local cases. In China, the burst that we saw in December or early January has quickly diminished to about low-double-digit in the teens. And vaccination in Macau and also in China has been pushed out to more and more people. So, I do believe that we have reason to be optimistic in the first quarter.

Back to you, Bill.

William J. Hornbuckle — Chief Executive Officer and President

That’s great. Thank you.

Robin Farley — UBS — Analyst

Great. Thanks very much.

Jim Freeman — Senior Vice President, Capital Markets and Strategy

Can we get the last question please, Chad?

Operator

The next question will come from Stephen Grambling with Goldman Sachs. Please go ahead.

Stephen Grambling — Goldman Sachs — Analyst

Thanks for sneaking me in. Changing gears a little bit, what are your latest thoughts and the different tasks to think through MGP and potentially deconsolidating net asset?

William J. Hornbuckle — Chief Executive Officer and President

Look, I’ll kick it off and we’ll let Jonathan in since I spoke way too much here. Obviously we have an opportunity with some more high bases units that we can go after. It’s still our long-term intent to potentially sell some of this down, if not over time all of it. So we’re an asset — more asset-light company. But there’s a lot involved between now and then.

And so, Jonathan, pick it up from there.

Jonathan Halkyard — Chief Financial Officer

I mean, I’d only offer a couple of thoughts, Stephen. As Bill said, it certainly is our goal over time to reduce our ownership stake in MGP. I think it would help in some ways simplify our story in our corporate structure. We do have some opportunities to do tax efficient sales of OP units. But it is also — it’s a high yield on the investment that we have in MGP right now, so relatively high yield. So we certainly need to balance our moves with that which is right now an appealing return on that investment, but the direction is certainly over time to reduce that.

Stephen Grambling — Goldman Sachs — Analyst

It makes sense. And then, if I can sneak a follow-up in on BetMGM and iGaming, the customer acquisition costs for all iGaming and sports betting players, including the M life customers, and if it is, what do you think the customer acquisition cost are for non-M life customers? Perhaps another way of coming at it, if you identify how many of the M life sign-ups of that 39% that were attributed to BetMGM? What does that equate to in terms of just number of people?

William J. Hornbuckle — Chief Executive Officer and President

Stephen, can we hook you and connect you with Adam for some of that offline?

Stephen Grambling — Goldman Sachs — Analyst

Yeah. That sounds good.

William J. Hornbuckle — Chief Executive Officer and President

That we could go on for a while on that one. We’ve obviously suggested that M life customers are a whole lot less expensive to get. There’s obviously more expense tied to brand new customers that over time we think will become profitable for all of us. iGaming actually costs a little bit more, but they’re much bigger wallet and they last a lot longer which is the value set there really. And sports betting is so new. We don’t know it three years into sports betting. It looks like there’s no one’s ever done it before. And so — but I’d love you to spend some time with Adam.

And if I could offer you up, Adam, that’d be great.

Adam Greenblatt — Chief Executive Officer, BetMGM

Cool. Cool. I love talking about our business.

Stephen Grambling — Goldman Sachs — Analyst

That’s great. Well, that’s helpful color there to start if off. And I look forward to following up. Thank you.

William J. Hornbuckle — Chief Executive Officer and President

Thank you, Steve.

Operator

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back to Bill Hornbuckle for any closing remarks.

William J. Hornbuckle — Chief Executive Officer and President

Thank you, operator. And thank you all for joining us today. Obviously we’re excited about our sports betting business. You can tell and I can sense everyone’s excitement. It’s obviously the conversation and the value driver of present. And we think ultimately in the long-term for long-term for the company. You’ve heard us talk about diversification. We are hell bent on that. Whether it’s into this space or other areas, brick-and-mortar and otherwise in Asia, that’s something we’re going to continue to be keenly focused on.

We’re going to have a very disciplined approach coming out of this emergence, if you will, to make sure that the expenses that we’ve put in play and we’ve all worked so hard for over the last 18 months. And frankly, two years have started a long time ago. And then we doubled down during COVID when we restructured once again at the parent company level.

You’ve heard from Jonathan his view on the outside. Our COE and our environment, our operating model is working. So not only is it cost effective, but we think it’s effective in general and it works. And ultimately, we’re going to become extremely customer centric. We want to value up our customers. We want to push them up our chain, our food chain, if you will. We think there’s a lot of retail money still to be had at Aria and at Bellagio. And we’re excited to get going with platforms here around digital marketing. And some of the things we’ve just put in play with the digital check-in that gives us access to customers like we’ve never had before that we’re excited ultimately to deploy.

So, a lot more to come. Obviously we’ve got probably three or four months of angst. And we’ll see as these states continue to roll out and most notably here in southern Nevada what happens. I think starting this week, we’ll hear from the Governor. And then over the next couple of weeks and months, it will be important to stay in touch. Obviously, any or all of us are available right after the call or into tomorrow morning. So I thank you all.

Operator

And thank you, sir. The conference has now concluded.

William J. Hornbuckle — Chief Executive Officer and President

Bye-bye.

Operator

[Operator Closing Remarks]

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